The government run scheme, Public Provident Fund, aims to help individuals make small savings for building a corpus fund. The PPF savings could help in providing financial support to investors after retirement.
One of the most unique retirement savings products, the Public Provident Fund (PPF) has become popular among consumers for being extremely secure and offering guaranteed returns, thanks to its combination of tax savings, low risk and guaranteed interest payments. Launched by the Union Finance Ministry’s National Savings Institute, the scheme mainly aims to help individuals make small savings for their retirement in order to gain promising returns.
While PPF offers an attractive rate of interest, the returns are also exempted from taxes as it falls under the Exempt-Exempt-Exempt (EEE) category. There are a few tricks that will help you to maximise interest rate on your PPF contribution.
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Current PPF interest rate
It is pertinent to note that the Central government announces fresh interest rates on PPF savings each financial year. The current interest rate for FY 2023-24 is 7.1 per cent. The balance in your PPF account will be compounded annually and you will also earn interest every month. However, the interest amount is credited annually.
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How to maximise PPF interest?
1. Pay by the 5th of every month: As the interest on the PPF balance is calculated between the 5th and the last date of a month, it is recommended that investors contribute by the 5th of every month. If the money is delayed by even a day, the amount will not be considered for interest calculation until the next month.
2. Invest up to Rs 1.5 lakh annually: As an individual can invest a maximum of Rs 1.5 lakh annually, it will be beneficial if the maximum amount is invested every year to make the most of the interest rate.
3. Make the entire investment by April 5: To earn the maximum amount of interest, one should contribute their entire investment amount for the financial year by April 5, within the first five days of the beginning of a new financial year, as that amount will be considered for interest calculation for the next 12 months.
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4. Enable online transfer: PPF is a long-term investment plan, so it is important to make regular contributions. In case one fails to visit their bank or post office for cash contributions, they should enable an online transfer facility as it helps in making regular payment and improves the chances of maximising returns.
5. Limit withdrawals: An investor should ensure that they are not making frequent withdrawals from their PPF account as it tends to erode the minimum balance scale and the person may not earn the desired interest amount. Except for emergencies, one should not withdraw from their PPF account.
